Larger car purchased

clonkel

My FiL gave us some money in 2024 when we were about to purchase a new car. He gave it to us to purchase a larger car (not one we would have bought) so we could continue to take him each week to see his wife in long term care. Due to his disability he could no longer get into our small car and he needed to use a wheelchair

We also used it to drive him to hospital etc.



Should this be classed as a gift?

thank you

Ayr_Rage

Yes, it was a gift.

clonkel

@Ayr_Rage thank you

I therefore have to pay 40% tax on it (less any allowances) ?

thanks

Ayr_Rage

clonkel said:

@Ayr_Rage thank you

I therefore have to pay 40% tax on it (less any allowances) ?

thanks

No, it is not classed as income, so no tax to be paid by you.

If the donor is on benefits then their use of capital may be questioned.

There may be IHT implications.

doodling

Hi,

clonkel said:

@Ayr_Rage thank you

I therefore have to pay 40% tax on it (less any allowances) ?

thanks

Gifts are not taxable in the UK.  You can give anyone as much money as you like and neither they nor you need to pay any tax at all on the transaction.  (This is assuming that they are true gifts and not, for example an attempt to pay someone for some work done to avoid Income Tax).

Gifts are potentially liable to inheritance tax if the person giving the gift dies within 7 years of doing so but normally if inheritance tax is due (and in most estates it is not) then it will be paid out of the deceased's estate, only if they die with insufficient assets to pay the inheritance tax would the recipient of the gift need to pay.  This is generally only an issue when the value of the gifts made by the deceased to people in the last 7 years of their life is substantial (e.g. hundreds of thousands of pounds) and they no longer had much in the way of assets when they died.

Keep_pedalling

If you are thinking of inheritance tax, then unless the gift was over £325k you have no tax liability.

clonkel

Sorry because this is the probate board I did not say that my FiL sadly passed away in July of this year.

He made the payment to us to get the bigger car in 2024

The total value of the estate will be around £152k including the house which was recently sold for £270k and it was tenants in common so he will get half less costs which is £132k plus £20k in savings = £152k

He also made a payment to my BiL to pay for his hip replacement back in 2022/23

Looking at the rules I thought I would have to pay tax on the £10k gift less £3k for allowance which is £7k x 40% = £2800

My BiL the same but a lower percentage

The £2800 would then come out of the estate but it still has to be paid although in this case by the estate. Does this mean the estate has to pay IHT of £2800 which comes out of the £152k?

Unfortunately the other children did not know about this as FiL asked us not to tell them. They will now find out as it will be deducted from the estate

OR

There is no tax to be paid and the estate is still worth £152k because there is £173k still remaining therefore the £10k to us and the £10k to the BiL will not be taxed to us nor will it reduce the £152k as the £20k is below the remaining allowance of £173k

thank you for your patience 

bobster2

It sounds like the total value of the estate (including the value of the gifts) is way less than £325,000 - so there is not going to be any inheritance tax to pay by the estate or the recipients of these gifts.

clonkel

@bobster2 thank you

I was getting confused until the end of my post when I realised that the gifts in total over the 7-years are significantly below the unused £173k

Which means we can stick to the FiLs request not to tell the other children.

poppystar

If the house was tenants in common and he was entitled to live there, ie was the beneficial owner, then the whole of that would be part of his estate. As he only has the £20k savings then this still won’t take the estate over the £325k. 

bobster2

clonkel said:

@bobster2 thank you

I was getting confused until the end of my post when I realised that the gifts in total over the 7-years are significantly below the unused £172k

Which means we can stick to the FiLs request not to tell the other children.

Residual beneficiaries of an estate are entitled to see full estate accounts at the end of the process - which would include these gifts made during the 7 years prior to death.